WASHINGTON, July 21 (Reuters) - A former radio talkshow host and investment adviser found liable for fraud asked the U.S. Supreme Court on Friday to rule on whether federal securities regulators violate the Constitution through the way they appoint their in-house judges.
Attorneys for Raymond Lucia, once known for his “Buckets of Money” investment strategy, argue in a 52-page petition that the U.S. Securities and Exchange Commission’s administrative law judges operate as “inferior officers” who wield significant decision-making powers.
Under the Appointments Clause of the Constitution, inferior officers must be hired by the head of a federal agency, the president or a court.
The SEC has argued that its judges are mere employees, because their decisions to impose penalties and other remedies against defendants are not final and are still subject to SEC review.
Lucia’s case stands a strong chance of being accepted by the Supreme Court for the next term, which begins in the fall.
Currently, two U.S. appeals courts are split over the issue as to whether or not the hiring of the SEC’s in-house judges violates the Constitution.
Last month, the SEC won a victory after a panel of 10 judges for the U.S. Court of Appeals for the District of Columbia Circuit rejected Lucia’s challenge.
The Denver-based 10th U.S. Circuit Court of Appeals had previously ruled that the SEC did violate the Constitution, however.
Since then, the SEC has halted all pending in-house trials involving defendants with appeal rights to the 10th Circuit until the issue can be resolved.
The SEC has faced mounting challenges in recent years to the constitutionality of how it appoints its in-house judges.
Lucia, for his part, has been fighting the agency since 2012, when the SEC sued him over claims he misled investors.
An administrative law judge sided with the SEC, finding Lucia liable for fraud and hitting him with $300,000 in fines and a lifetime ban from investment-related work. He has been appealing ever since, arguing that the judge was improperly hired.
“The SEC’s regime of unaccountable adjudicators has left countless casualties on the field - not least Ray Lucia,” wrote Lucia’s legal team, led by Gibson Dunn & Crutcher’s Mark Perry, in the petition to the court.
“The (administrative law judge) who presided over his case imposed on him the ‘securities industry equivalent of capital punishment.’” (Reporting by Sarah N. Lynch; Editing by Tom Brown)